Microsoft doubles profits

Windows XP has proven itself a winner, boosting Microsoft revenues by 10 per cent to $7.25bn for the fourth quarter.

Scott Boggs, corporate controller at Microsoft, claimed Windows XP Pro licences accounted for more than half of all operating licence sales.

Consumer lines including MSN online services, Office desktop software and its server side products also performed strongly.

Despite the continued tightening of corporate purse strings and the ravages of the PC market, the software giant managed to grow its overall business while its rivals suffered.

Boggs said: "We started the year expecting PC sales to be soft but I don't think anyone imagined we'd see a decline of four per cent for the year. Nevertheless, we still grew our business by 12 per cent.

"It's been a pretty respectable year given the context and compared to our peers and competitors."

However, Graham Fisher, analyst at Bloor Research, claimed US sales of Windows XP accounted for the majority of the growth in sales as many European organisations adopted a wait-and-see policy.

Revenue for Windows server products grew by 13 per cent during the fourth quarter, and 10 per cent for fiscal 2002. Boggs said while this shows good growth it is slower than expected.

Mike Thompson, analyst at Butler Group, said this came as no surprise.

"The server side is still soft as many customers still have concerns about where the XP server side products will fit with the current offerings," said Thompson. "Microsoft has not done the best job in the world of explaining this."

The 10 per cent quarterly growth in revenue has also been attributed to Microsoft's soon-to-be introduced licensing programme.

But the software giant should not count on a large uptake within Europe to bolster future figures, warned Butler Group's Thompson.

"There are a lot of unhappy customers out there feeling that they are being taken on a forced upgrade march. This is causing many not to just roll over and take whatever Microsoft decrees - many are now turning to open source alternatives."

Xbox sales remained the one area of disappointment for the software giant. Boggs reported 3.9 million units were shipped compared to the 4.5 million to six million expected to be shipped when the product launched.

The past fiscal year had been one of the most challenging, said John Connors, CFO of Microsoft. But he was optimistic about the future, predicting 11 to 13 per cent revenue growth for fiscal 2003.